Papers were valued at BRL 12 before the leak was announced; fell to R$ 1.93 this morning
The shares of Americans at B3 (São Paulo Stock Exchange) again experienced a strong drop this Monday (16.jan.2023). The shares were traded at R$ 1.93, which represents a drop of 38.7%.
On Thursday (12.jan.2023), the day after the announcement of accounting inconsistencies of R$ 20 billion, the retailer’s shares fell 77%. They recovered part of their losses on Friday (13.jan.2023), up 15.81%. Even so, the company’s market value fell by R$7.98 billion in the two days. It was valued at R$ 2.84 billion at the end of Friday (13.jan).
The company announced this Monday (16.jan.2023) João Guerra as interim CEO. He will lead Americanas during the 30-day postponement of the company’s financial foreclosures. Within this period, the retailer will also have to announce a financial recovery plan.
Americanas shares were valued at BRL 12 before the announcement of a BRL 20 billion shortfall. They fell to R$ 1.93 this Monday (16.jan.2023).
UNDERSTAND THE CASE
THE TJ-RJ (Rio de Janeiro Court of Justice) granted Americanas on Friday (13.jan) a precautionary measure, at the request of the company, after the company declared the amount of R$ 40 billion in debt. The decision establishes a period of 30 days for filing a request for judicial recovery. It also suspended financial obligations and debt payments for the same period. Here’s the full of the document (51 KB).
Americanas released a statement to the market on Wednesday (11.jan) reporting inconsistencies in accounting entries of approximately R$ 20 billion. The executive Sergio Rial resigned as CEO of the company, as did André Covre, director of Investor Relations. Here’s the full of the document (409 KB).
According to Americanas’ most recent financial statement, for the 3rd quarter of 2022, the company has 3,601 stores in more than 900 cities. It had 40,000 employees and 53 million active customers. The decision of the 4th Business Court of Rio de Janeiro said that the company is responsible for creating 100,000 direct and indirect jobs and annual collection of R$ 2 billion in taxes. Here’s the full (50 KB).
Among the determinations listed in the decision of Judge Paulo Assed, of the 4th Corporate Court of the District of the Capital, there are also:
- “Suspension of the enforceability of all obligations relating to financial instruments” of the company signed with institutions previously listed by Americanas;
- “Suspension of any arrest, attachment, seizure, search and seizure and restriction on the assets”, and effects of default;
- the suspension of clauses that impose early maturity of the store’s debts; and
- preservation of store contracts, including credit.
Sergio Rial was announced to command the company in August 2022, but assumed the presidency on January 2 of this year. On January 11, he resigned from his post after identifying accounting inconsistencies of BRL 20 billion. He replaced Miguel Gutierrez, who led the retail company for 20 years.
The CVM determines that there is an independent auditor for the balance sheets. Since October 2019, the PwC Brazil took on this role, replacing the KPMG. The company approved Americanas’ balance sheets without reservations for 2021. Power360 contacted PwC, which said it does not talk about customer cases. The space remains open.
BTG ATTEMPTS TO REVERSE
The TJ-RJ denied the urgent request of the BTG Pactual to lift the 30-day blockade of the financial executions of the Americans. In practice, the case will be considered in normal rite by the court. Here’s the full of the decision (176 KB).
The case is being discussed at the 4th Corporate Court of the Judicial District of Rio de Janeiro. BTG blocked BRL 1.2 billion in the retailer’s investments in the bank, as a way to ensure the payment of debts
According to the bank, the financial crisis of the company was caused by a “confessed fraud” by the former CEO of the company, Sergio Rial. He left the company after 9 days in office for having found accounting inconsistencies of R$ 20 billion.
After the judge’s decision to postpone the payment of debts by 30 days, BTG appealed Americanas’ decision over the weekend. The judge on duty Luiz Roldão established that the case will be considered in a normal rite, without urgency.
BTG’s defense said that the company’s financial crisis was caused by a “confessed fraud” announced by Sergio Rial. He contested the request for a judicial recovery plan, which would have to be submitted within 30 days: “Accounting fraud is not a legitimate social function, deserving of the protection of the law, but an act that must be severely punished, with its potential criminal consequences”, said BTG.
INVESTIGATION
THE MPF-SP (Federal Public Prosecutor’s Office in São Paulo) opened on Friday (13.jan) a procedure to investigate indications of “insider trading”, which is the use of privileged information to obtain profits and advantages in the financial market.
The information on the opening of the investigation was initially published in the newspaper Economic value and confirmed by Power360. The State attorney’s office will investigate the events and, in case of signs of irregularities, will open a police investigation.
“Now, a São Paulo attorney will carry out a preliminary analysis of the information reported and define the next steps, which may mean the initiation of an investigation, the filing of the case or other appropriate measures. There is no deadline for this review”, said the MPF-SP.
Directors of Americanas would have sold more than R$210 million in company shares in the second half of 2022, shortly after the announcement that Sergio Rial would lead the company in January 2023.
The MPF-SP wants to know whether Americanas’ majority shareholders had any knowledge of the company’s financial situation at the time of the sale.
THE CVM (Comissão de Valores Mobiliários) announced on Thursday (12.jan) that it opened 3 administrative processes to investigate Americanas. Here’s the full of the press release (114 KB). He said that he will take the appropriate measures for the “adequate and careful clarification of all acts, facts and events in relation to the case”.
The lawsuits deal with both the company’s financial situation and the circumstances surrounding the announcement of the BRL 20 billion shortfall. Here are the processes:
- CVM Administrative Process No. 19957.000413/2023-18;
- CVM Administrative Process No. 19957.000415/2023-15;
- CVM Administrative Process No. 19957.000425/2023-42.
According to the commission, in the event of illegality or infractions, each of those involved may be duly held responsible for the “rigor of the law and to the extent applicable”.. The CVM may also sue the Federal Police and the Federal Public Prosecutor’s Office.
CVM’s objective is to ensure the efficient functioning of the capital market and the preservation of an environment conducive, safe and adhering to constitutional principles for all market agents, ensuring the protection of investors.
ACCOUNTING INCONSISTENCIES
In video, Sergio Rial said he took office on January 2 and said he was unable to respond to all queries about the inconsistencies. However, he stated that he will help the company even if he is away. He also stated that it is not a 2022-only theme, but of “several years passed”.
“I am not able at this moment to be able to tell you when it started [essas inconsistências]”, said.
The former president of Americanas stated that there are problems with the drawn-out risk, also known as advances to suppliers or confirm. “It is nothing more than the presence of the bank in the financing structure in the company’s supplier account. […] I realize that a good part of this Americanas supplier account was, essentially, bank debt, which, therefore, will have to be recataloged as such. Obviously, to be approved by the external audit”he stated.
He stated that the R$ 20 billion are several accounting estimates from recent years that “are on the swing”.
“We are not talking about a number that is off balance sheet. […] It’s just not registered, appropriated over the last few years.”he declared.
Rial said that the company has a gross debt of R$30 billion to R$35 billion, a cash position of R$8 billion to R$9 billion and shareholders’ equity of around R$16 billion. “The company continues to sell, and it is absolutely viable. It has a mismatched level of debt so it can proceed. The capitalization conversation will have to take place […] The size of what has to be done is not necessarily what I wanted at first”, he said, about the resignation.
The executive declared that a major risk is the interruption of the financing line to suppliers carried out by the banks.
INDEPENDENT COMMITTEE
to Americanas announced on Thursday (12.jan.) an independent committee to determine the reasons for the R$ 20 billion hole in the company’s balance sheet. The group will be led by the lawyer Otávio Yazbek. Vanessa Claro Lopes and Pedro Melo will also join.
THE AMEC (Association of Investors in the Capital Market) said, in a note, that it is monitoring with concern the content and consequences of the accounting inconsistencies detected. He stated that, according to Americanas’ material fact, it is not possible to determine all the impacts on the company’s financial statements and balance sheet.
“AMEC externalizes its perplexity regarding the performance of the company’s governance bodies and their respective gatekeepers, mainly audits, in light of the estimated magnitude of the accounting inconsistency“, said.
The association also criticized Sergio Rial’s explanations in a private conference call, with limited access.
“In favor of due transparency, AMEC understands that there is a need for timely and more objective manifestations by the company’s governance bodies, in particular, its board of directors“, said. The note is signed by the association’s chief executive, Fábio Coelho.
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